Green Data Centers: New Rules for Renewed Success?

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EU-wide sustainability rating of data centers” was passed. This regulation sets forth an obligation for data centers
Sam Altman embarking on a journey to raise $7 trillion may seem incomprehensible at first
Conversion of office spaces or outdated indusinto green data centers. Subsequently, the heat generated by these data centers could be utilized to warm neighboring homes, shelters, or office buildings
in the state of New York, from 2024 onwards to 2026, 2,026MW in additional generation and transmission will be needed for data centers, semiconductor

Demand for digital services has more than doubled since 2010, according to the IEA, increasing global internet traffic by 25-fold. As such, data centers are significant drivers of growth in electricity demand in many regions. With an estimated 9643 data centers spread across North America, South America, Africa, the Middle East, several Asian countries, Europe, and the UK, green data centers will be key in strengthening overall energy performance and building & upholding sustainable practices.

IEA: Global trends in digital and energy indicators, 2015-2022

Enacting sustainable data center regulation. Gracefully, as the European Commission always is, on Friday, March 14, 2024, the initial regulation for an “EU-wide sustainability rating of data centers” was passed. This regulation sets forth an obligation for data centers to publish information and data on their energy performance and sustainability practices. The Commission will establish an EU-level ‘public database’ which datacenters will utilize for reporting, with the first reporting day set for September 15, 2024, followed by the next report due on May 15, 2025, and every year thereafter.

Policymakers must allocate tax incentives. As the new EU enforcement spreads around the globe in policymakers’ briefing sessions, data center operators are surely awaiting the Brussels Effect to kick into gear. Green data centers offer companies an option to green their operations while also benefiting from tax credits, tax relief, and other government incentives offered for green projects. This has made the need for green data centers more practical than ever.

A wave of green data center headlines. Recently, GreenSquareDC™—an Australian company based in Perth, Western Australia—established the WAi1, a $1 billion Australian dollar ($656.3 million) data center purpose-built to handle the resource-intensive computational power in artificial intelligence, which requires five times more processing power and storage.

On March 15, 2024, Google signed a new energy supply agreement that will see the company receive over 430 megawatts of carbon-free energy to power its Mesa data center in Arizona by 2025. The emission-free power will assist Google in achieving at least 80% carbon-free energy (CFE) for its operations in Arizona by 2026.

With data center-related emissions estimated to be 1% of global energy-related greenhouse gas emissions, companies in the Global South, such as Kenya, are also looking to set up 100% green data centers running on geothermal energy.

As reported by African Business on March 12, 2024, Kenya’s geothermal sector has signed an MoU with EcoCloud, a local data center company, and G42—an Abu Dhabi-based tech firm—to set up a data center to fully run on geothermal power. The project will benefit from VAT exemption on green projects in compliance with the VAT Act 2013 and VAT (Amendment) Act 2014.

Declining long-term office leases and government budgets. While BRRR Method (Buy, Rehab, Rent, Refinance, Repeat) experts may be quick to oppose the idea of retrofitting downtown office spaces outdated industrial spaces into data centers. States, municipalities, and local governments can explore revenue opportunities through adopting building codes and tax incentives to encourage the development of green data centers in vacant office spaces facing challenges in securing long-term lease agreements. Instead of converting costly downtown offices into rental suites, private investors or third-party entities could venture into downtown areas to negotiate contracts with commercial real estate owners, provided that building codes permit the conversion of office spaces into green data centers. Subsequently, the heat generated by these data centers could be utilized to warm neighboring homes, shelters, or office buildings.

Using grid-interactive data centers (GIDCs). According to a news report published by The New York Times on March 14, 2024, the rise of artificial intelligence is causing a surge in energy demands at data centers across the US. A recent study also highlighted that this escalating electricity demand poses a risk of future blackouts if additional power isn’t supplied to the grid to meet the ever-increasing demands. If that’s not enough, in the state of New York, from 2024 onwards to 2026, 2,026MW in additional generation and transmission will be needed for data centers, semiconductor plants and other industrial facilities .

New York: Large Load Economic DevelopmentProjects Modeled in CRP — New York: Large Load Economic Development
Projects Modeled in CRP

As further electricity supply is brought online, there are opportunities for utilizing grid-interactive data centers (GIDCs), incorporating aggressive power use effectiveness (PUE) targets and technologies such as battery storage, smart grids and green storage solutions holding DEKRA certifications. In conjunction, data centers can opt to manage their online or active time during peak electricity hours.

Bottom line. Sam Altman embarking on a journey to raise $7 trillion may seem incomprehensible at first. However, if I were in his shoes, I would likely prioritize achieving a strong sustainability rating, especially with the potential impact of the Brussels Effects—EU-wide sustainability ratings for data centers—spreading to the United States. Even without this influence, prioritizing sustainability is crucial. Therefore, integrating energy conserving artificial intelligence chips alongside decarbonization measures will be essential in navigating this wave of innovation and growth in data centers. Moreover, the boom in artificial intelligence and generative AI tools will benefit data center developers structuring feasibility studies or KPI’s rounded in enhancing energy efficiency standards and curtailing greenhouse gas (GHG) emission. Policymakers in the Global North and South must find avenues within their powers to grant incentives to data center developers who prioritize community benefits alongside sustainable practices.

Also see. Top 3 Green Data Center companies whose ESG report will offer you great insights into the world of data centers.

1.Equinix Inc. (NASDAQ: EQIX)